The nanomaterials industry (NMs) is slowly evolving, from producing a suite of innovative materials in Research and Development (R&D) to laying a basis whereby NMs can be engineered to meet industrial commercial requirements. The industry is entering the inevitable and necessary “bedding-down” process, addressing issues that rest at the heart of the effort to sustain its commercial exploitation. Nanomaterials are precision-engineered raw materials, a synthetic engineering holding immense promise. However, building the fledgling industry to a point where it offers the essential of commercial usefulness beyond the mere novel to provide substantive benefit to commerce and society poses an immense challenge, a challenge many NM participants now conclude. The challenges posed are by no means insurmountable, and steady progressions are being made behind-the-scenes with global insurers, regulators and capital investors alike slowly breaking down the barriers to progress.

We encourage global business and the investment community to look beyond the tendency to dismiss scientific euphoria and the complexities of nanoscience as the proverbial “no-go”; the opportunity presented by nanomaterials is too staggering for the investment and insurance community to ignore, despite a somewhat over-optimistic hyperbole on occasion. The emergence of these materials offers the potential of a new economy based on precision engineered materials, initially complimenting existing materials moving to converge with, or replace more traditional materials and manufacturing processes. For its own interests, we encourage the investment community to accept that, while focus has centred on high-end medical and electronic applications using NMs, we are already witnessing the development of commercial realities in more immediate uses of NMs capable of rapid cash-generations.

In agriculture, Nano-Iron Chelate fertilizer is now available, essentially a hormone free, price competitive fertilizer proven to increase wheat and grain crop yields in excess of 30% beyond the effectiveness of existing fertilizers. Nano-enabled household water filtration systems are on the market in the United States, where there is also the use of nano-enabled fuel catalysts. These have fuel efficiency savings of over 10% higher than currently available economy fuels, and deliver a 20% reduction in harmful emissions. Nano-enabled lubricants are also finding traction with one notable product being used in the motor racing industry.

We also find nano-enabled polymers based on the formulation of NMs in masterbatches, securing higher characteristics of conductivity, ESD resistance and better tear, wear and abrasion qualities to existing bulk polymers. When we add in the evidence of use of basic NMs such as Fe (Iron) – soil remediation, Cu (Copper) – conductive inks/metallic shielding/RFIDs, not to mention W (Tungsten) – body protection, we can see beyond what many assume to be the trinkets or novels of nano-science where focus has centred on the use of NMs in consumer cosmetics, self-cleaning clothing, and other areas. Nanomaterials offer so much more.

Societal Concerns

The concerns expressed by regulation agencies, insurers, society consumer groups, and the global investment community are concerns shared by the supervisory Board of INSCX exchange and are very real. Clearly, the emerging NM industry should develop a self-regulatory mechanism to foster a willing compliance by industry participants to accept checks and balances as a necessary facet on which to base commercial sustainability. Only the nanobusiness community can effectively impose self-regulation on itself, and it must do so in order to stand on its own two feet. Even today, self-regulation provides the cornerstone for effective official regulation, a fact often forgotten when we confuse the formal requirements to register materials with REACH or the financial regulation of capital committed to investment speculation in listed commodities. Regulation imposed without the willing compliance of industry participants has always failed to deliver the necessary safeguards to the self-preserving interest of capital or the wider interests of societal well-being.

With hindsight, the rush to commercialistion over the last ten years has not been structured in a manner that takes on board the “heavy-lifting” participants in the supply. Use of NMs must commence to benefit nanoscience, society and business.

Resource Squandering

Significant squandering of capital, both state and private, committed to nanoscience has occurred with a continuance of a head-long rush to secure capital backing by way of sources wholly unsuitable to the emerging field. Several IPO listings on stock markets since 2005 resulted in horrendous losses for investors as shares in nano listed issues went into free-fall. Meanwhile, a generation of private commercial experts has also emerged to create a service industry culture in nanoscience complimenting an already over-loaded conference circuit. The fact remains that increasing numbers of products, particularly consumer non-durables, coatings, and consumer electronics, are containing NMs without the development of satisfactory checks and balances to offset possible “long-tail” risk.

NM companies are sometimes entering into wholly inappropriate licensing and distributorship arrangements to their cost, and in many cases are licensing an exclusive use of what remain in effect raw materials and commodities, which should be freely listed on an open market. This smacks of desperation, not a structured foresight. While in order to obtain investment nanobusiness must answer the concerns of the investment community, in key areas, access to the sources of capital used by other materials sectors is now available if time and thought is spent examining the function of the commodity exchange process, as opposed to clinging to the notion that nanomaterial remains beyond being classed as a raw material or commodity.

Recent years have also witnessed the emergence of consultants producing “research for sale”, often based on widely optimistic assumptions of growth, while most experts fail to present the value orientated investment community with defined entry and exit parameters to justify investment in the next “hot” prospect.

Meanwhile most of the NM supplier base, the very foundations of the industry – many of whom could actually use the capital squandered thus far – remain cash-starved, creating a desire in nanobusiness to sell something, almost anything to survive. This stampede to commercialisation has blinded most to the obvious need to address key concerns in safety, accountability and capital harnessing beyond appeal to the gallery, while little focus has centred on ensuring the stabilisation and clarity of purpose essential to sustain growth.

Addressing Concerns

INSCX exchange was launched to help contribute to the eradication of obstacles to sustained commercialisation in collaboration with other aspects of the emerging structure. Nanomaterials offer a raft of solutions to immediate societal resource problems, for example, creating a basis for carbon-friendly solutions and the greater economy. Too often the focus has remained on the high end where cash generation to positive earnings can take longer and require participants with deep pockets to sustain R&D, while attempting to plough through a thicket of IP and exhaustive regulatory protocols.

While the pursuit of the high-end application should and will continue, NM suppliers can act to achieve stabilization through effectively structuring trade in the raw materials base of nanoscience. The role of the open market today is to self-regulate competing interests across the existing economy. Therefore, why not employ a similar mechanism to self-regulate emerging nanosciences? The exchange process creates for nanomaterials a market-hub where the competing interests of supplier, user, regulatory authority, investor and underwriter can interact to span diversities ranging from price visibility, trade allocation/procurement, capital provision, Health & Safety (H&S) good practices, testing/characterisation methodology and the insurability of nanomaterials based on uniform good conduct and cradle-to-grave supply-chain sequencing.

The objective remains to develop self-regulation as a basis for compliant commercialisation enabling progress with cohesion. Societal concern in the context of nanomaterials dovetails with the concern for capital safety pledged to exploit emerging nanosciences. Prudent capital investment cannot flow from investment in materials where there remains a doubt as to potential risk or the ability to trace and identify risk. Investment in the engineering and functionalisation of nanomaterials, the raw materials base underpinning nanoscience, assumes these materials are in effect no different in a commercial context from any other used in industry. The materials must be assumed safe, present a cost benefit, be assured quality, be supplied and used by competent participants, and be held accountable from source through the supply chain.

Standards must be proven independent from vested interest, as must the definition and inspection of material specifications. The interests of global capital will not accept a supplier code of conduct, no matter how prestigious the name behind it in the context of nanomaterials, given their inter-disciplinary crossover. The standard for NMs must be proven independent of the supplier base and imposed as a mandatory requirement in order to be taken seriously.

For example, BP does not police the global Crude Oil industry any more than RTZ police the quality of aluminium, iron ore, copper, or thermal coal. The independent proving of quality is a function of the independent and open commodity exchanges where these materials are listed for trade. In contrast, BP and RTZ are listed as Approved Suppliers. The integrity of trade is underpinned by the laws of international banking and the independent inspection of these commodities by organisations such as Intertek, SGS and Saybolt, where materials supplied are held accountable. Official regulation rolls in behind these self-regulating mechanisms where self-regulation acts to balance the excess of competing and often opposing interest. It is an interlocking process, creating a natural synergy between supplier, user, regulator and investor.

Suppliers and users of NMs must see the logic in their advance to embrace uniform standards in competence, source to supply-chain sequencing, price transparency and capital allocation to support autonomous growth, as these factors rest at the very foundations of any sustainable industrial complex. Other successful raw materials industries use the exchange mechanism, and the purpose of INSCX remains to act for the NM industry in much the same manner as the London Metal Exchange acts to help co-ordinate the ongoing exploitation of the industrial metals industry. Other commodity exchanges act to help drive trade across a variety of raw materials and commodities in a manner proven more fluid than materials sectors where even today there remains no neutral or open marketplace. When we consider how the development of the original commodity exchange process acted to galvanise interest in the emerging materials central to the first industrial revolution, this dawning may open the eyes of nanobusinesses scrambling now to gain commercial traction. Key areas addressed by this exchange process are safety, accountability, market transparency and the procurement of capital to the degree necessary to sustain growth.

NanoMaterials (SHE)

Nanomaterials SHE (Society, Health & Environment) is the industry standard of competence expected now of any supplier and secondary user of engineered nanomaterials through INSCX exchange. Consisting of a formal on-site initial and annual inspection audit, the scheme was developed in the UK by way of collaboration between the Institute of Occupational Medicine (IOM), the SAFENANO project and AssuredNano. Institutions such as Lloyds of London now regard the SHE standard as a benchmark H&S standard, demonstrating supplier/user competence in NMs. SHE delivers good practice in the manufacture, use and disposal of NMs primarily to address societal concerns but remains inextricably linked with measures instigated by INSCX exchange to further augment and realise its benefits through addressing a key risk concern.

SHE Credits System – Global Reach

NM users and suppliers can use the INSCX exchange process to finance the cost of initial and ongoing SHE inspection audits. Through agreeing to impose a small % levy on any transaction executed via the exchange, the respective counterparties to the trade in question can obtain a credit where funds are allocated to cover the financial cost of a SHE audit. This removes lack of financial resource as an obstacle to imposing a collective good practice on industry participants. SHE is already operational within the EU region whereby all exchange members (NM Approved suppliers and registered users) qualify for support under the INSCX SHE Credits system. As of late July 2011, SHE will also be announced as available in the United States. This development creates a situation where the investment/insurance community, international regulators and society at large can be assured of the competences of exchange approved and registered participants engaged in the supply and industrial use of engineered nanomaterials. SHE can now help elevate good practice competences across industry participants in a cost-effective manner while also addressing issues of concern flagged by the global insurance industry, for example enabling a traceability of nanomaterials from source through the supply chain to end product.

DAS (Downstream Audit Sequencing)

DAS is the process whereby the transaction ID reference, generated by way of any trade on INSCX in a listed nanomaterial used to identify the respective trade for clearing and settlement, is sequenced forward from supplier to buyer as a reference number to be listed on any product manufactured in whole or in part by way of using the traded nanomaterial.

DAS sequencing combines with the enabling of SHE accreditation for both supplier and user of a listed nanomaterial to present the global insurance industry with a universal standard in competence, and the means through which to identify where possible risk resides in the supply chain from source NM to end product. The DAS mechanism will also help facilitate assessor investigations, should litigation arise from a proven negligence, or instances where the use of NMs is demonstrated as posing a societal risk.

All exchange Approved Suppliers and registered users of NMs are bound to meet the SHE/DAS requirement.

Capital Financing

One key stumbling block for the emerging NM supplier base remains the obtaining of value driven capital funding to support upscale in supply capacity, and the presenting of NMs as commercially useful to industry going forward. Existing sources of finance available to NM suppliers (equity listing, strategic partnerships and state funding) presents emerging NM suppliers with difficulty. In return for capital support, the individual NM supplier usually faces the prospect of dilution of ownership and/or the imposition of an unhealthy gearing on the business at the SME stage of evolution. One key reason why INSCX exchange was launched was to follow the example set by commodity exchanges during the first industrial revolution, where the exchange process acted as the bridge, linking capital to finance upscale in supply of items such as agricultural grains, oils and industrial metals to exact specifications.

Open Door

The London Metal Exchange does not own shares in RTZ, any more than the US NYMEX (now part of the CME group) owns equity in BP. The exchange is the market system freely and willingly used by both RTZ and BP. A similar process tapping the resources of global capital markets is now available to approved suppliers registered with INSCX exchange, regardless of domicile.

Ongoing discussions are continuing to build industrial supply capacity in engineered nanomaterials; particularly in the UK, as existing suppliers registered with the exchange are coupling with aggressive start-up expansions. The choice open to the emerging NM industry is one where participants (suppliers and users) can very easily and cost-effectively embrace the INSCX exchange concept, or be left behind as the exchange moves aggressively to bridge capital resources to sponsor the creation of industrial scale capacity across the existing supplier membership and new start ups.

There is no restriction on the number of NMs that are listed for trade. The message delivered to the global investment community remains one of clarity and the ability to capitalise on market pull as opposed to speculation in favouring investment in exchange approved suppliers. The signal to society and official regulation agencies is one confirming the compliance of registered users to the best available knowledge.

Registration with INSCX can be completed using the link provided and approved on meeting the standard audit of the applying registrant, and payment of the annual registration fee.

About Us

The European Business Review is a bi-monthly journal bringing you features on leadership, strategy and global economic issues.
Rise above your competitors and make informed decisions with business innovation and insightful analysis from global experts. The European Business Review publishes innovative perspectives on issues that have significant influence in the world globally. We welcome research, ideas, opinions and insights on business, finance, management and industry.